Bill Fleckenstein continues: This morning’s action in our equity market initially followed up on yesterday’s failure and by midday the indices had lost about 1.5%. However, from there the losses were cut by more than 50%, with the Nasdaq rallying the most and cutting its loss to just 0.3%. I had to leave with a couple hours to go, so please check the box scores to see how the day turned out.

JGBs? Not Interested
Away from stocks, green paper was quite a bit weaker against the yen, but mixed against most other major currencies. The everyday scapegoat, oil, first lost 3% then rallied to a small gain by the time I left. Fixed income was higher, and in the land of complete lunacy, that being Japan, 10-year JGBs closed last night at negative seven basis points while 5-year JGBs closed at negative 21 basis points. I just bring that up as a reminder of how insane markets can get. That’s not to say we won’t see negative rates on our 5- and 10-year bonds, but I sort of doubt it.

Turning to the metals, they were lively again, with gold climbing 1.5% to silver’s 0.75% before they both gave back some gains, with silver trading flat to golds 1% gain. Obviously, silver has lagged this rally in gold, but by nature silver tends to lag until all of a sudden it explodes and takes over the lead. I can’t say when that might happen, I just think it is quite likely it will.

Included below are three questions and answers from today’s Q&A with Bill Fleckenstein.

Bonus Q&A

Question: Hi Bill, What is your take of miners last half hour swoons? They have not been closing well.

Answer from Fleck: “Noise.“

Question: Fleck, one of the arguments against gold as an investment is that “it pays no interest”. Since most low-risk assets around the world are paying close to zero, or even negative, interest rates, that removes one argument against gold. Europe is talking about eliminating the 500 Euro bill to keep people from storing their wealth outside the banking system, and the US might do the same with $100 bills. This also supports gold as a storehouse of wealth. With gold beginning to rise, maybe we can hope that logic and common sense are finally breaking out, and mindless faith in the power of central bankers is waning. I have appreciated your laying out a roadmap for just this sequence of events.

Answer from Fleck: “Yes, NIRP has been part of what has helped get gold moving again, IMO.“

Question: Hi Bill, I’m reading and hearing more discussion about the fed eventually adopting NIRP here in the US.

1. What do you see as the likelihood of this?

2. Where would you look for an alternative safe parking place for cash?

3. How would NIRP affect bond market risk (if at all)?

4. Would longer dated treasuries be attractive as interest rates become negative, or would bond market risk preclude this?

Answer from Fleck: 1. At this point, it seems somewhat unlikely, but that could change quite fast. If so, we will be able to know well before it happens.

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